What Happened

Foot Locker reported that it earned $1.26 per share in Q4 on revenue of $2.21 billion versus expectations of $1.25 per share and $2.22 billion. The net income worsened from a positive $189 million in the same quarter a year ago to a net loss of $49 million, despite a 4.6-percent increase in sales from a year ago.

Investors could have reacted negatively to reported comparable store sales, which fell 3.7 percent in the quarter and fell 3.1 percent for the full fiscal year. Excluding the impact of foreign currency, total sales for the full year fell 0.5 percent.

Why It's Important

Foot Locker has delivered several concerning earnings reports over the past year, and a negative comparable store sale metric in the fourth quarter could have led some to infer that near-term woes remain in place. For example, Foot Locker's stock lost nearly one-quarter of its value in one trading session in August 2017 in reaction to its second-quarter report, where comparable-store sales fell 6 percent.

Shares of Nike Inc (NYSE: NKE) and Under Armour Inc (NYSE: UAA), key suppliers of apparel and footwear to Foot Locker's stores, were each trading lower by around 2 percent.

What's Next?

Looking forward to fiscal 2018, the retailer guided its comparable store sales to be flat to low single-digit and margins to "begin recovering" from 2017's 31.6-percent rate.

"The first quarter of 2018 will likely see the continuation of sales and margins in line with trends in the second half of 2017," Lauren Peters, Foot Locker's executive vice president and chief financial officer.

The retailer is confident it will inflect to positive comparable store sales by mid-2018, with strengthening sales i the second half of the year, Peters said.

"We also expect a double-digit percentage increase in annual earnings per share, with an effective tax rate in the 27-to-28-percent range and a lower share count both contributing to this performance."